Global Insight Perspective | |
Significance | Publication of the guidelines in the Canada Gazette, Part II is the culmination of a long consultation and negotiation process between the Canadian government and pharma companies. |
Implications | The final version of the Patented Medicines Regulations differs from the version pre-published on 6 October 2007 on two points: the requirement for pharma companies to report the type of benefits deducted in the average price calculation has been removed and the electronic filing requirement comes into effect on 1 July 2008. |
Outlook | The removal of the requirement to report discount types in the average price calculation is a significant victory for the pharma industry, as it not only simplifies the price reporting process, but also decreases the risk of government intervention in price setting. However, in cases where overpricing is suspected, the government reserves the right to require disclosure of pricing discounts. |
Canada's New Patented Medicines Regulations Come into Effect
Canada's Patented Medicine Prices Review Board (PMPRB) has announced that the new Patented Medicines Regulations were published in the Canada Gazette, Part II on 19 March. The publication automatically brings them into effect (with the exception of Section 5 of the regulations, the start date for which is 1 July 2008).
Updating the regulations has been seen as a necessity by the Canadian government. The PMPRB, which is in charge of ensuring that drug prices in Canada are not excessive and compare favourably to the prices in the seven reference states, has long argued that pharma companies' slowness in the reporting of average prices delays the RMPRB price review. Any needed price corrections are also delayed as a result, leading to higher spending on patented drugs by provincial healthcare authorities and patients.
Revising the guidelines has proven to be a long process. The revised guidelines were first pre-published on 31 December 2005. Following industry consultation some revisions were made and the guidelines were again pre-published on 6 October 2007. The latter set of pricing regulation revisions has already been examined by Global Insight in detail (see Canada: 8 November 2007: Final Version of Pharma Price Review Amendments Published in Canada). The current final publication of the guidelines differs from the October 2007 version on just two points.
The first and most significant difference is that the October version of guidelines included a requirement for pharma companies to identify the type of discounts and benefits used in the calculation of the average price of each patented drug. This requirement has now been dropped from the final version of the guidelines, largely as a result of the outcome of the Leo Pharma (Denmark) case in the Federal Court of Canada (see Canada: 13 November 2007: PMPRB Backs Off Over Benefits Inclusion in Average Price Calculation). The second difference between the October version and the final guidelines is that the deadline for electronic filing of pricing data by the companies has been moved from 1 January 2009 to 1 July 2008. The only reason to have a later start date for the electronic filing requirement was to allow companies to incorporate data on the types of discounts included in the average price calculation. Since this requirement has now been removed altogether, there is no need to delay the start of electronic filing beyond July 2008.
Outlook and Implications
The new price reporting regulations, in their final form published on 19 March, are not nearly as bad for the pharma industry as the initial PMPRB proposal in 2005 suggested. The October 2007 version was already significantly softened and the new March 2008 final version has excluded the one sticky point that the industry most complained about. The PMPRB's original proposal was to require companies to report the size of discounts used in the average price calculation. Had that proposal been approved, the PMPRB would have been in a much stronger position from which to identify companies attempting to minimise the average ex-manufacturer price by loading the calculation with unnecessary discounts.
Industry pressure has been significant and by October 2007 the requirement to report the size of discounts was modified to a requirement to report the type of discounts. Even that requirement has now been removed from the final version of the legislation. The end result is that the PMPRB has not gained a new and powerful tool to identify excessive discounts used in the average price calculation that companies report to the PMPRB.
Despite that significant compromise on behalf of the Canadian government, the new regulations promise to lower branded pharmaceuticals prices in Canada over time. With the new regulations, the PMPRB is slashing 29 days from the current price reporting deadline. In addition, the timeline for reporting on the identity of a medicine has been reduced by 23 days. Earlier price reporting by companies means that the PMPRB can detect an excessive price earlier and take corrective action earlier, potentially saving millions of dollars for Canadian consumers and public-sector payers.
Furthermore, with the finalised guidelines the PMPRB reserves the right to ask specific pharma companies to identify the type of discounts used in the average price calculation when there is reason to suspect overpricing. The burden is on the PMPRB to ask for data and it will only do so in certain cases of egregious overpricing. However, still the tool is there and the penalties for companies that do no respond to the PMPRB's request for disclosure are also in place. So the pharma industry is not out in the clear completely, but at least the discounts-reporting burden will not apply to the majority of companies and will hardly ever affect those that are not suspected of significant overpricing of their products.